Arm Holdings chief Warren East warns off potential buyers

Warren East, the chief executive of British microchip designer Arm Holdings,
has sounded a warning to potential buyers – claiming that few suitors would
have anything to gain by owning the listed company.

Intel, Arm's biggest and higher-profile rival, has been tipped as a potential buyer, along with Apple, which is one of Arm's customers with its iPhonePhoto: Alamy

Hewlett-Packard's agreement to buy Autonomy, the software giant, for $10bn has ignited interest in other British technology companies, and drove Arm's shares 2pc higher on Friday despite a slump in the FTSE 100.

However, in his first interview since news of the Autonomy deal emerged last Thursday, Mr East said that it would be difficult for Arm to change hands without putting a dent in its value.

"If you get a buyer who is a significant part of the ecosystem, in which they already play a part, it is likely that they would be excluding part of the market and therefore diminishing part of the value of Arm," he said.

"Arm has been built around the principle of being agnostic at every point in the value chain. Because of that approach, it means that acquisitions are very difficult. It's not impossible, but Arm is a very valuable business as it is and a significant part of that value lies in its agnostic approach," he said.

Cambridge-based Arm designs microchips for use in electronic products ranging from smartphones to health monitoring devices. It does not make any chips itself, instead licensing the designs to customers who pay royalties, helping Arm to £234m of revenues in the first half of 2011.

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Intel, Arm's biggest and higher-profile rival, has been tipped as a potential buyer, along with Apple, which is one of Arm's customers.

However, Mr East said an approach by Intel would raise "a lot of regulatory issues" and that there would be no point in Apple acquiring the company.

"If you look at the end customer, like an Apple, or any company within the ecosystem at any particular point in the value chain, if one of those companies were to acquire Arm - well, why?

"They either want access to the technology, which they have already, or they want to prevent competitors from gaining access to it. In reality it doesn't work very well...If you want to prevent your competitors getting the technology, it's not a very good way of doing it. There are 800 licences out there. Most are perpetual licenses. They last forever. The worst that company could do is seriously inconvenience their competitors."

Instead, Mr East issued a pre-emptive plea to shareholders to preserve Arm's independence.

"Hewlett-Packard gives Autonomy a great platform for growth but there is [already] tremendous potential for the Arm business to grow a great deal further and it can do that from a position of independence in Britain. We just don't need it," he said.